Commercial Lease Case Study

This assignment analyzes a case study involving an old industrial estate owner seeking to develop the property for office use. It examines different lease agreements, legal implications, and relevant case law to provide advice to the landlord on navigating the Landlord and Tenant Act 1954.

COURSEWORK

INTRODUCTION...........................................................................................................................1
Question 1........................................................................................................................................1
Advice to the client on the action need to take on each unit.......................................................1
Question 2........................................................................................................................................4
Differences between two leases..................................................................................................4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
Commercial lease is a clear written contract for the rental by a tenant of business property
which is owned by landlord. Basically, main objective of trade possessions is to earn or to create
large amount of profits which make them distinct from residential (Brennan, 2014). However,
this project is going to outline a case of old industrial real estate where landlord wants to develop
his property. Thus, corrective suggestion is required by the landlord in order to develop the
property for office use. Along with this, differences between various units of the property are
also going to explained in the project.
Question 1
Advice to the client on the action need to take on each unit
According to the given case study, owner of old industrial estate is having 4 units which
is very much appropriate for office development. However, all the 4 units are different from each
other in various aspects. For example; Unit 1 was let on a 15 year FRI (Full Repair and
Insurance) lease which was come into force from December 2004. On other hand, Unit 2 was on
a FRI lease from December 2009 in which tenant was paying rent to the landlord. Unit 3 was
also on lease same as unit 2 but there is a presence of rolling break clause between both the
parties. Lastly, unit 4 is vacant and occupiers are strongly interested for acquiring this space.
Hence, by analysis the whole situation it has been understood that entire estate is in demand for
official use. Thus, before entering into a contract of lease landlord needs to learn about the
Landlord and Tenant act, 1954 in order to understand whole procedure. This act is highly
beneficial for landlord as it helps in clearing all the necessary clauses, norms, beliefs, rules and
regulations of contract. Along with this, possibilities of mistakes and errors will also minimize
by considering the sections of landlord and tenant act (Turvey, 2017). Therefore, proper steps
which needs to be considered by landlord while developing each unit of industrial estate as
offices are discussed as follows-
Unit 1- This was on a let for a 15 year FRI lease which came into force from December
2004 under the landlord and tenant act, 1954. As per the contract, tenant is liable for repairing
and insuring the whole unit in a proper manner. In 2005, extension was built in the property and
added air conditioning at a price of £125,000. Therefore, by considering all the factors landlord
have the authority to offer a contract to the tenant that he can use the building for his business
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purpose or might act as a broker in between landlord and any other commercial parties. For
example; number of entrepreneurs are coming at marketplace for opening a business and failed
in founding suitable place for their offices. It means, landlord can easily attract new comers from
his beneficial deal. As this unit was already improved very much like; extension will help in
connecting electricity and air conditioned is beneficial for electronic equipments. Thus, any
small and large business can easily work here for a long term as this place is having number of
quality such as; situated nearby market, convenient, labour at minimum price henceforth. By
showing all these things landlord can easily get succeeded in attracting any of the tenant. As a
result, if tenant get entered into contract then automatically unit 1 will developed as offices
because there are some rules and regulations which needs to be followed by both parties (Radin,
2017).
For example; According to the “Landlord and Tenant act, 1954” there are fixed term of
tenure like 2 years, 5 years and 10 years and certain terms on which both parties get agreed
before signing an agreement. Furthermore, any damage which done during the tenure then tenant
is liable to recover it as he/she is using the property. Instead of this, “Section 25 notices” which
were named after the landlord & Tenant act states that landlord needs to set out the information
in a notice which he wants to convey to the tenant for ending a business tenancy. On contrary to
this, “Section 26” states the process which is used by tenant for ending business tenancy such as;
he/she also needs to set the data in notice for informing the landlord about surrendering of lease
validity.
Hence, after knowing about all these acts and section landlord can easily get entered into
a lease contract which helps him in developing his Unit 1 because after usage of any commercial
enterprise, demand of that place automatically get enhanced. Along with this, entire area will
develop as an office infrastructure which might pay by landlord as compensation to the specific
company whosoever has designed (Rasila, 2010).
Unit 2- This unit was on Let for a 10year FRI lease which means that this region is not
requiring too much of maintenance which is a positive sign in development. In fact rent of this
unit is coming late but still there is an opportunity to develop this by making collaboration with
tenant only. For example; in order to enhance the unit, landlord can offer a liberty in rent to the
tenant for making a positive relationships. As a result, renter might promote the office in local
groups and repair it with more concentration. Additionally, by the use of landlord act, both the
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parties can calmly come into an agreement for supporting each other. For instance; landlord can
support tenant by offering liberty in rent data whereas tenant can support landlord by developing
his office in much better manner (Whitman, 2012).
Unit 3-One of the most advantage of this unit is that party which was involved in contract
for 15 year lease have added a rolling break clause. It means, tenant have the authority to
terminate the agreement after every five years from lease commencement on the basis of specific
condition such as; prior notice of nine months. Landlord have the authority to extend the notice
by convincing the tenant with various benefits such as; offer additional compensation, promising
to offer free service for one month and so on (Fereidouni, Al-mulali and Mohammed, 2013).
Mainly, development of Unit is possible if the region is using on the regular basis as well as
proper attention is given to the area. On contrary to this, landlord needs to learn about the
“Section 37 of Landlord and Tenant act, 1954” also that a business tenant has the authority to
ask for the compensation from owner if he/she is not renewing the business. Hence, some of the
ideas which must used by owner for developing Unit 3 are -
Conduct advertisement for informing friends, business groups, partners and various other
corporate members about the office infrastructure. By the use of section 25 notice, owner can
sets all the necessary data about Unit 3 in a notice for informing other parties about the business
tenancy.
On the other hand, as per the employment act and minimum wage act 1998, landlord can
also hire some additional employees on daily basis by offering minimum wage to them for
improving the conditions of Unit and make it more impressive.
Unit 4- Last unit of old industrial estate is vacant and ready for occupiers which means
owner can easily develop it more or more. In fact, not that much effort will require in the
development of Unit 4. Landlord can only use labours for designing it just like office
infrastructure on the basis of minimum wage act. As a result, minimum amount will requisite for
the enhancement of Unit as this will already ready for the occupiers. Owner can easily come into
contract with commercial bodies for offering Unit 4 as official purpose.
Case law-
According to the case of Grange v Quinn (2013), Grange (G) was a tenant of sandwich
shop for a six year lease with Quinn (Q) who is the landlord and living above the shop. But after
six months, Quinn evicted the Grange and breaches the contract by claiming that she had failed
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in keeping window clean. After considering the entire case, court have gave the judgement in the
favour of Grange because according legal bodies, reason which was gave by Quinn for breaching
the contract is not sufficient. In fact, Q wasn’t given any prior notice before ending the business
tenancy and this was considered as illegal under the section 25 of Landlord & tenant act, 1954.
Therefore, owner of all the 4 Units also need to consider this that prior notice is really
indispensable before terminating the contract as well as reason also need to be legal or genuine.
Another case of dilapidations in which tenant get failed in repairing is “Repair
covenants: Sunlife Europe Properties Ltd v Tiger Aspect Holdings Ltd(2013)”. Basically, in
this case, Sunlife Europe Properties Ltd (S) was a commercial owner and claimed compensation
from Tiger Aspect Holdings Ltd (T) for acquiring price of remedying dilapidations after
expiration of lease. But in the judgment of court, cost of equipments fluctuates as per the time
because contract was 35 year old due to which this situation arises. However, as per the landlord
& Tenant Act, tenant is responsible for replacing the broken plant not for meeting the current
standards.
Question 2
Differences between two leases
All the four Units are distinctive with each other in various terms just like offices of
various businesses which were situated in a single state. For example; Grantley house, Park
Lane, Cranford and so on in Middlesex. Basically, these examples wanted to explain that there is
a major difference in every offices but sometime it might be minor. In fact, all the Units have
their own quality and weakness. For instance; Unit 1 is for 15 year FRI lease whereas Unit 4 is
not required FRI because it was already prepared for occupiers and none of changes is requisite.
On other hand, Unit 2 is for 10 year lease but contract of Unit 3 always fluctuates and changes on
the basis of rolling break clause. This shows the difference between the lease of Units because of
its internal and external reasons (Bryan, Deaton and Weersink, 2015).
CONCLUSION
From the above project, it has been concluded that commercial lease is really a major
responsibility which distributed between landlord and tenant. Along with this, it will consist a
long procedure in order to minimize the probabilities of errors. Thus, case of old industrial
landlord shows that development of various offices or regions differ from each other because
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each of them is different. In fact, examples of business or plants were also supported in the
project for better understanding.
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REFERENCES
Books and Journals
Brennan, G. ed., 2014. Landlord and Tenant Law. Oxford University Press.
Turvey, R., 2017. The economics of real property: an analysis of property values and patterns of
use. Routledge.
Radin, M.J., 2017. Reconsidering the rule of law. In The Rule of Law and the Separation of
Powers (pp. 37-76). Routledge.
Rasila, H., 2010. Customer relationship quality in landlord-tenant relationship. Property
Management, 28(2), pp.80-92.
Whitman, D.A., 2012. Fifty Years of Landlord-Tenant Law: A Perspective. UALR L. Rev., 35,
p.785.
Fereidouni, H.G., Al-mulali, U. and Mohammed, M.A.H.B., 2013. The effects of transaction
costs, landlord and tenant practices and property rights on foreign real estate
investment. Margin: The Journal of Applied Economic Research, 7(3), pp.351-370.
Bryan, J., Deaton, B.J. and Weersink, A., 2015. Do landlord-tenant relationships influence rental
contracts for farmland or the cash rental rate?. Land Economics, 91(4), pp.650-663.
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